Monday 13 June 2011 12.30 EDT
First published on Monday 13 June 2011 12.30 EDT

Ed Miliband today made the case for social justice with a hard edge. He pledged to end the "take what you can culture", from the boardroom to the benefits system, and committed Labour to becoming the "party of grafters". In reform of social housing, Miliband called for an approach where, "rather than looking solely at need, priority is also given to those who contribute – who give something back."

Some on the left may feel queasy about this. But they should understand its logic and cheer it. Not only is it right in principle that those who take out have a responsibility to put back in. It is the only way we can really detoxify our politics of welfare.

For Miliband's goal is to put the contributory principle back at the heart of our welfare system – that basic code of fairness first crystallised by Beveridge in his famous 1942 report and on which our postwar settlement was founded. Unlike Beveridge, Miliband didn't articulate the theory, though he did invoke his father's wartime service in the navy, helping to win the war and build the peace, to set the scene.

Two years ago, when the Fabian Society called for a return to the contributory principle in our book The Solidarity Society, it sparked controversy. Now it is an idea uniting thinkers across the party, from Ruth Lister to James Purnell.

Most angst about benefits is driven by the feeling that some people are taking out without putting back. Recent Fabian polling found that, for those who believed claimants would make a contribution back to society, 49% thought we should spend more on benefits. But of those who didn't believe claimants would contribute back, just 11% wanted to spend more. So a sense of earned entitlement is incredibly important for welfare legitimacy. Welfare policies actually do the vulnerable a great disservice if they fail to provide a way for recipients to demonstrate they are putting something back in.

When Thatcher scaled back the contributory system for working-age adults in 1981, she knew precisely what she was doing. The Tory vision of welfare is something you are entitled to when you fall short of the rest of society. By contrast, the contributory principle links welfare and work together, making entitlement to welfare a badge of full citizenship. It was a threat to the Thatcherite vision of dismantling the welfare state. That's why we need to get it back – and fast.

Earned entitlement to welfare is controversial for some who prefer to think in terms of "welfare rights". In fact, none of the founders of our welfare state, from Tawney to Beveridge to TH Marshall, were actually in favour of unfettered welfare rights. As Beveridge put it in his 1942 report: "The correlative of the state's undertaking to ensure adequate benefit for unavoidable interruption of earnings is enforcement of the citizen's obligation to seek and accept all reasonable opportunities of work."

Of course we must ensure that those who cannot work are protected. But to shape a whole welfare system solely around meeting this kind of need would create a "residual" American-style welfare system. And in the long term that would serve the poorest very badly indeed. In fact, because social insurance commands wide popularity, countries that eschew "welfare rights" for systems of earned entitlement often end up redistributing far more to the poorest than we do.

In office, Labour was good at tackling poverty among children and pensioners – who the public see as "deserving". The real scandal is that the number of working-age adults in poverty increased by more than one million. But we will never be able to turn this around until we rid working-age welfare of the whiff of the undeserving poor. That's what the contributory principle does.

But rewarding contribution cuts both ways, though. Carers in England currently do about £70bn a year of unpaid care work. It's time to recognise this contribution better, as well as recognising the social contributions of students and volunteers too. Taking the logic of reciprocity seriously will actually mean extending support to more people, not rolling it back.

But Labour should be confident of the popularity of this new welfare pact. Our polling found that 88% of Labour supporters want to see more financial support for carers; but so do 86% of Conservative supporters. People's commitment to reciprocity is hard-wired, transcending party lines and class boundaries. Policies that meet this test can garner a huge depth of public support.

As the Labour leader made his speech this afternoon, many around Westminster were still trying to read it through the lens of the latest bickering between Blairite and Brownite factions. Ironically, with this single speech, Miliband has signalled far more ambition in reshaping our social contract than Tony Blair or Gordon Brown ever managed.